PYMNTS GCC Series: Saudi Arabia, at the Intersection of Tech and Islamic Finance

In this final installment of the PYMNTS GCC series, we assess the FinTech space in the Kingdom of Saudi Arabia (KSA), the most populous country (close to 36 million) in the Gulf Cooperation Council (GCC), a union which also consists of Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates (UAE).

See Part 1: PYMNTS GCC Series: High Smartphone Penetration, Govt Support Boosts UAE’s FinTech Growth

See Part 2: PYMNTS GCC Series: Bahrain Drives Open Banking Adoption in MENA

See Part 3: PYMNTS GCC Series: Partnerships, PayTech Innovation Move Kuwait Into Digital Era

See Part 4: PYMNTS GCC Series: Still in Its Infancy, Oman FinTech Hub Shows Huge Potential for Growth

See Part 5: PYMNTS GCC Series: Big Tech Firms Set up Shop in Qatar

In general, Saudi Arabia is a highly regulated country, but in the 21st century the ruling monarchy has pursued policies of economic liberalization.

For example, in 2018 it became legally possible for Saudi women to start their own businesses without a male’s permission, a move that is expected to improve women’s rights and entrepreneurialism in the Middle Eastern country.

Read more: Jahez’s Billion-Dollar IPO Boosts Venture Capital Investment in Saudi Firms

Read also: Saudi AI Startup Mozn Raises $10M

For FinTech startups, the Saudi authorities have placed the creation of a thriving FinTech ecosystem high up on their list of development goals, making it a key component of the country’s “Vision 2030” economic strategy.

As a sign of the government’s drive to further strengthen the FinTech sector, Fintech Saudi, an initiative by the Saudi Central Bank in partnership with the Capital Market Authority, was launched in 2018 to act as a catalyst for the development of the industry in Saudi Arabia.

See also: Saudi FinTech EdfaPay Raises $1.6 Million for B2B Payments

The country went on to launch its regulatory sandbox in 2020, a year before it soft-launched its open banking framework, which is currently being rolled out.

Saudi Arabia will soon start to reap the rewards of government initiatives like the regulatory sandbox. For example, KSA-based FinTech platform Lean Technologies, which is currently operating within the sandbox, is experimenting with novel financial products such as digital accounting tools, robo-advisory, buy now pay later, and P2P lending.

In January this year, the FinTech firm secured $33 million in a Series A funding round led by a number of international investors including New York-based Liberty City Ventures and former General Electric CEO Jeff Immelt.

An Islamic FinTech Hub

KSA is one of the leading markets when it comes to Islamic banking. According to a report by Ernst and Young, as of 2016, 33% of all assets banked according to the principles of Islamic finance were in Saudi banks, more than any other country in the world.

Related: Is 2022 the Year Islamic FinTech Takes Off?

And as Saudi financial institutions have pursued digitization strategies and local startups have developed innovative FinTech solutions, the emphasis on Islamic finance has remained.

Learn more: MoneyGram, urpay Partner on Saudi Arabia Payments

For example, a range of mobile-first lending platforms such as Tamam and Emkan have emerged in recent years providing Sharia-compliant loans through an app, while business-to-business (B2B) FinTech firm Lendo matches small businesses that need quick access to working capital with investors looking for short-term returns.

Read on: Middle East-Based PayTabs Links With Visa For ‘Tap To Phone’ POS Service

And it’s not just small businesses that are embracing Islamic finance.

Major local players like payment service provider PayTabs, which has gone on to serve eCommerce retailers across Middle East and North Africa (MENA), has enlisted the services of the Sharia Review Bureau (SRB) to help run its business in a Sharia compliant way.

For all PYMNTS EMEA coverage, subscribe to the daily EMEA Newsletter.